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Israel To Ban Binary Operators Targeting Overseas Customers

The Israeli government is pushing through a bill that will ban the highly controversial binary options industry that’s been accused of engaging in fraudulent and misleading transactions.

Binary options are instruments by which a customer bets on whether the value of a financial asset which could be a currency, stock or a commodity. The bet is place on whether that selected financial asset will go up or down in a fixed timeframe.

In a surprise move, the bill was presented to the cabinet directly by Finance Minister Moshe Kahlon instead of being routed through the Ministerial Committee for Legislation. This is possibly because the measure was being stalled in the committee.

Based on information shared by a spokesperson from the Israel Securities Authority (ISA), since the bill has been approved by the cabinet, it will now be fast-tracked through the Israeli legislative Knesset for its conversion into a law.

The law will shut down all binary trading firms that are operating within the country’s borders and will allow the ISA to prosecute anyone found in violation. All trading platforms that do not have an official license will no longer be allowed to operate from within the country and offer services to overseas clients. The provisions also cover companies dealing forex and CFD transactions. Violations can result in penalties of upto two years in prison with the jail time going up to 10 years if money laundering is involved.

In a statement Shmuel Hauser ISA Chairman said

Beyond the severe economic harm to citizens around the world, marketers of binary options are increasingly causing reputational damage and inflaming anti-Semitism towards Jews and Israelis

The regulator has received several complaints from consumers and regulators in a number of countries who complained of heavy losses suffered as a result of binary option trades carried out in Israel. The country had earlier passed a law banning the domestic binary options trading last year.

Although the bill had been introduced in February 2017, it had so far failed to find sufficient traction. According to some reports, lobbyists for the binary options industry were working to block the bill’s passage at the Ministerial Committee for Legislation.

The Binary options industry has been blossoming in Israel for several years as there weren’t a lot of regulations governing the industry. The industry is said to generate revenues between $5 billion and $10 billion a year.

In anticipation of the crackdown, several binary option companies have already shut down operations and moved to Eastern European countries.

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